PCI point-to-point encryption guidelines raise new questions

The PCI Security Standards Council today is expected to issue guidelines on use of point-to-point encryption in protecting sensitive payment card data, but the narrow approach — which is focused on hardware — is raising questions.

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The PCI Security Standards Council today is expected to issue guidelines on use of point-to-point encryption in protecting sensitive payment card data, but the narrow approach — which is focused on hardware — is raising questions.

Merchants and payment-card processors have suffered from the lack of industry standardized end-to-end encryption from the point where a merchant captures customer card data in a point-of-sale (POS) device, transmitting it over networks, including the Internet, to card-processing and bank networks. Hackers have taken advantage of this weakness, as the notorious criminal Albert Gonzalez (now convicted and in jail) did two years ago in his attack against Heartland Payment Systems and many merchants, including TJX Companies and Hannaford.

"There were no standards," says Bob Russo, the council's general manager, about point-to-point encryption, saying the new guidelines, which are entirely voluntary and optional, are the council's first step in influencing product development in this area.

The council has drawn from work done at the National Institute of Standards and Technology (NIST) and supports use of the AES standard as well as some RSA technologies, he noted.

The council by year end intends to release more technical requirements to vendors about building this type of point-to-point encryption, and under a certification program, the council anticipates certifying encryption devices early next year. The guidance also covers encryption key-management and practices that should be adhere to in its use, such as strong authentication and monitoring.

While use of any PCI-certified equipment is entirely voluntarily, the advantage is expected to vastly simplify a PCI audit. "The big benefit here is for the merchant," said Jeremy King, the council's European director,

But the guidelines only pertain to hardware-based equipment. Plans for specifying a fully software-based approach — or a hybrid software/hardware approach — are in the future, as is guidance related to security for mobile payments.

When the council's first direct step to point-to-point encryption is needed, it raises a lot of questions, according to analysts.

For one thing, merchants and their processors such as RBS, Heartland, Fifth Third Processing Solutions and others, have gradually started to adopt network point-to-point encryption based on their own diverse methodologies, says Gartner analyst Avivah Litan. When Gartner asked 77 of larger retailers about encryption adoption for payment processing, over one-fifth of them said they had already put something in place.

Though it's not a comprehensive survey, the Gartner findings do suggest that a variety of encryption methods have come into substantial use already. The question for merchants, payment processors and banks will be whether to continue whatever method they've come up with or shift toward equipment that might eventually be approved in the council's certification process.

Heartland, for instance, after its data breach, embarked on an ambitious course to design and build its own encryption-based processing gear designed for use with its customer base.